Self-Fulfilling Business Theories

Helene Finidori posted an article in her blog a year ago (which I just saw today), entitled The Art of Management.

Helene cited a paper from Sumantra Ghoshal in The Academy of Management: Learning and Education entitled Bad Management Theories Are Destroying Good Management Practices . Helene summarised the paper as arguing that

. . . the sets of ideas that have shaped management theories for the past 30 years have freed students from any sense of responsibility, influenced social and moral behaviors, and have led, in a self-fulfilling process, to the worst excesses.

This is pretty much the argument I developed during my doctoral research and published in chapter 10 of my doctoral thesis.

I argued that economists create economic ideas and theories, that those ideas are disseminated to policy makers, business leaders, and thought advocates, and that those ideas ultimately impact on and change the economic systems that economic theories model.

I noted that this has significant implications for ‘economic science’ as the ‘positive-normative’ distinction thrust as a first principle on Economics 101 students needs to be seriously reconsidered if not abandoned, and the notion that economics could and should be a science modelled on classical physics and system dynamics needs to be fundamentally questioned.

The main body of scholarly literature that my thesis built on to make this argument was what I called the ‘reflexive prediction’ literature, and the term I gave to the argument was ‘ideational reflexivity’ – the notion that ideas about the system can enter into and change the dynamics and state of the system being studied.

While working on the chapter making this argument in my Ph.D thesis, I did a Google search for similar work in this area, and I came a cross a (then) working draft of a paper by Fabrizio Ferraro, Jeffrey Pfeffer, and Robert Sutton later published in Academy of Management Review 30(1): 8-24 as “Economics language and assumptions: how theories can become self-fulfilling.” The authors and I had been working on the same problem from different angles.

The notion of reflexivity between ideas and reality does not apply just to the relationship scholarly theory and business practice. For example, as noted in a previous blog article, mass media picks up themes and information in society, but also has the potential to shape society. Film and television can have a powerfully reflexive relationship with society. Similarly, any measurements of social and economic metrics, from unemployment to interest rates to credit ratings, may have an impact on the society being measured as people and society gear their activities towards the reported metrics, giving rise to ‘reflexive measurement’.

So, I would like to thank Helene for pointing me to Ghoshal’s paper, which I had not read, and to put on the record that my doctoral thesis and Ferraro, Pfeffer and Sutton’s paper also advance the notion of a ‘self-fulfilling prophecy’ (or in some cases, a self-denying prophecy) between economic and management theory and economic and business reality.

It is interesting that Ghoshal, Ferraro Pfeffer and Sutton and myself all arrived at a similar argument independently and we published around the same time.

Perhaps the reflexive relationship between economic and business theory and economic and business reality is ‘an idea whose time has come.’

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Self-Fulfilling Business Theories

Helene Finidori posted an article in her blog a year ago (which I just saw today), entitled The Art of Management.

Helene cited a paper from Sumantra Ghoshal in The Academy of Management: Learning and Education entitled Bad Management Theories Are Destroying Good Management Practices . Helene summarised the paper as arguing that

. . . the sets of ideas that have shaped management theories for the past 30 years have freed students from any sense of responsibility, influenced social and moral behaviors, and have led, in a self-fulfilling process, to the worst excesses.

This is pretty much the argument I developed during my doctoral research and published in chapter 10 of my doctoral thesis.

I argued that economists create economic ideas and theories, that those ideas are disseminated to policy makers, business leaders, and thought advocates, and that those ideas ultimately impact on and change the economic systems that economic theories model.

I noted that this has significant implications for ‘economic science’ as the ‘positive-normative’ distinction thrust as a first principle on Economics 101 students needs to be seriously reconsidered if not abandoned, and the notion that economics could and should be a science modelled on classical physics and system dynamics needs to be fundamentally questioned.

The main body of scholarly literature that my thesis built on to make this argument was what I called the ‘reflexive prediction’ literature, and the term I gave to the argument was ‘ideational reflexivity’ – the notion that ideas about the system can enter into and change the dynamics and state of the system being studied.

While working on the chapter making this argument in my Ph.D thesis, I did a Google search for similar work in this area, and I came a cross a (then) working draft of a paper by Fabrizio Ferraro, Jeffrey Pfeffer, and Robert Sutton later published in Academy of Management Review 30(1): 8-24 as “Economics language and assumptions: how theories can become self-fulfilling.” The authors and I had been working on the same problem from different angles.

The notion of reflexivity between ideas and reality does not apply just to the relationship scholarly theory and business practice. For example, as noted in a previous blog article, mass media picks up themes and information in society, but also has the potential to shape society. Film and television can have a powerfully reflexive relationship with society. Similarly, any measurements of social and economic metrics, from unemployment to interest rates to credit ratings, may have an impact on the society being measured as people and society gear their activities towards the reported metrics, giving rise to ‘reflexive measurement’.

So, I would like to thank Helene for pointing me to Ghoshal’s paper, which I had not read, and to put on the record that my doctoral thesis and Ferraro, Pfeffer and Sutton’s paper also advance the notion of a ‘self-fulfilling prophecy’ (or in some cases, a self-denying prophecy) between economic and management theory and economic and business reality.

It is interesting that Ghoshal, Ferraro Pfeffer and Sutton and myself all arrived at a similar argument independently and we published around the same time.

Perhaps the reflexive relationship between economic and business theory and economic and business reality is ‘an idea whose time has come.’

There are no comments yet. Be the first and leave a response!

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Trackback URL http://www.think-differently.org/2007/03/self-fulfilling-business-theories/trackback/